The developer of Harbor East has dipped its toes back into Baltimore's tenuous condominium market, presenting the city with new plans for long-stalled luxury residences atop the Four Seasons Hotel.
The design calls for 63 condominiums instead of the roughly 150 initially envisioned in a project that the developer said still could be scrapped.
The uncertainty highlights Baltimore's tentative condo market. While sales numbers and prices suggest that the market is rebounding, condos remain an uncommon, often premium product in Baltimore, and many developers remain unconvinced that there is sufficient demand.
The Four Seasons design would add six floors to the 21-story building, making for nine floors of condos instead of 23 as initially planned. The developer, who originally planned a 44-story tower, halted at 21 floors in 2009 amid the recession. On Thursday, the city's design review panel approved the design for adding fewer floors of condos.
"We would love to build the full building, and we think the full building looked great, but we don't think the market can sustain it," said Jason Huss, development director for Harbor East Management Group, an affiliate of John Paterakis' H&S Properties Development Corp. "Honestly, we're still not certain whether or not the condo market will sustain [the new units]."
Baltimore's relatively affordable housing — particularly the abundance of often low-maintenance rowhouses — has reduced demand for condos in Baltimore compared with markets such as Washington, where condos represented 47 percent of sales last year, said Corey Hart, a senior product manager for RealEstate Business Intelligence, a research subsidiary of the MRIS multiple listing service.
In Baltimore, they represented about 7 percent of sales, with 477 closings, according to 2013 MRIS data. That market share has held steady over time: Condos represented 5 percent of sales in 2005, with a record 580 closing.
"Single-family homes are affordable in the city and there's ample supply. There's somewhat of a difference in the D.C. market, where everything's expensive and single-family homes are extremely expensive," Hart said.
The median condo price in Baltimore in 2013 was about $199,000, up 11 percent from last year. That's below the 2007 peak of $223,500, but well above $150,000, where prices bottomed out in 2011, according to MRIS.
By contrast, the median price for all homes in the city was $123,000 last year, down from the 2007 peak of $153,000 but up 3.7 percent from 2012.
In a city where housing remains relatively affordable, the decision to buy a condo in Baltimore is often driven by factors other than price, said John Maranto, a real estate agent with Re/Max Preferred in Baltimore.
"People have a perception that condos can be less work than houses, and for some people that may be true," said Maranto, adding that safety is sometimes a consideration. "It's mainly just a lifestyle preference."
Some of the condo price gains are driven by low supply: There were just 190 active condo listings in the city in 2013, down from 477 in 2007, according to Delta Associates which tracks the mid-Atlantic condo market.
Analysts said the price gains have not been large enough to drive new development.
The Four Seasons is the only announced condo project in the city right now. Others might be in preliminary stages, but nothing is expected to open in the next two years, according to Delta Associates. In Washington, about 1,800 new condos came online last year and 800 more are expected this year, according to the Alexandria, Va.-based company.
"We don't expect much new product to be developed in the short term," said William Rich, a Delta Associates senior vice president. "That could change ... as these price increases start to take hold and the development community becomes more comfortable with the prospect of adding new units to the market."
Developers' wariness reflects in part the difficulty of selling new condominiums.
Of the active listings, 177— about 90 percent — are never-occupied new units that have been on the market for years.
At 414 Water Street downtown, for example, 105 of 312 residences remain unsold since sales began in 2005, according to Delta Associates. At the Ritz-Carlton Residences on Key Highway, where sales started in 2004, 47 of 190 units remain unoccupied.
When the Ritz-Carlton opened, asking prices ranged from the upper $800,000s to $5 million. At 414 Water Street, prices ranged from $200,000 to $500,000.